In January 2019, a retired executive of Koppers — a global manufacturer company based in one of the most recognizable buildings in the Pittsburgh skyline — found himself sued for serving as an advisor to another company in violation of a covenant not to compete. Robert Wombles, who had been Koppers R&D vice president for carbon material products, allegedly took confidential information with him to the competitor, according to the Pittsburgh Post-Gazette. The federal suit seeks damages and an injunction. In his answer, Wombles claims the covenant is unenforceable.
Noncompete agreements are common for high-level managers and for employees with specialized knowledge of a company’s products, services and internal affairs. These agreements are enforceable provided they are reasonable in terms of time, geographic reach and scope of prohibited activity. In some cases, an employee with a noncompete agreement can make a transition from one company to another without the former employer raising a valid legal fight. This is because not all noncompetes are legally enforceable. Employers should keep in mind that a noncompete agreement may be invalid if:
- The employer failed to uphold any part of the employment contract — An employer may break a contract by not providing promised pay or benefits, or by ignoring its obligations to an employee in some other way.
- The prohibition is too broad — To be valid, a noncompete agreement must be tailored to protecting the employer’s legitimate business interests. Employers cannot completely prevent employees from looking for work in his industry or field.
- The time restriction is too long — The duration of the noncompete must be limited to what is necessary to prevent harm to the former employer. A period of six months is usually considered reasonable whereas a multi-year restriction can be found excessive.
- The agreement takes in too much ground — The geographic reach of the noncompete should also be limited. Usually, the territory is defined in terms of a commutable distance radius from the former employer’s location. In the case of national or international industries, a wider area may be allowable. However, it cannot be so wide that if effectively prevents the former employer from finding work in his field.
Noncompetes often include or are coupled with nondisclosure agreements (NDAs) that forbid an employee from revealing their knowledge of the employer’s business or trade secrets. Even without an NDA, revealing trade secrets can be the subject of a lawsuit claiming damage to intellectual property. However, violating an NDA or revealing trade secrets require separate proof and cannot be presumed from a former employee’s taking a job at a competing company.
If an employee is terminated without cause, the company may face an uphill battle trying to enforce a noncompete. After all, if the employee was considered non-essential, his or her moving on to another company should not pose a legitimate threat of harm. Carefully drafted noncompetes often include liquidated damages clauses and waivers that on their face prohibit employees from challenging them. However, like any contract, defenses to performance can be raised if the agreement was flawed in its execution or imposed onerous terms.
From our office in downtown Pittsburgh, the attorneys at Feldstein Grinberg Lang & McKee, P.C. advise Pennsylvania business owners and corporate boards on breach of contract issues and other business disputes., including those arising from noncompete agreements. To schedule a free 15-minute consultation, call us at 412-471-0677 or contact us online.
